Jeff Judy

Jeff's Thoughts - March 16 , 2011

Succession Planning Revisited

In a recent edition of Jeff's Thoughts, I pointed out that many banks have had the same employees available to them and their customers for many years. And I suggested that this situation is as much a risk as an asset, since the improving economy will increase both labor force mobility and the rate of retirement. (See "Now You See Them, Now You Don't.")

The issue, then, is "succession planning," but not succession planning as it is commonly defined.

All too often, we use the term "succession planning" very narrowly, and rather lazily. For many institutions, "succession planning" simply means asking the question, "Who will be the next leader(s) of our bank?" Particularly in family-run community banks, the answer to that question can be known quite a long time in advance.

Get beyond the simple "who" question. Consider:

What kind of person is needed to fill a leadership role (even if we already know the "who")?

Where will replacement staff be found for other levels of the institution, not just the leadership?

I recommend looking for a constellation of abilities across several positions. In the most enlightened institutions, "succession planning" is less about names and individuals and more about developing a collective talent pool. At these banks, they have taken the time to think through what will be needed. And then they have developed strategies for ensuring that the necessary attributes are there to be tapped when the time comes.

Maybe you do already know who is most likely to be the next CEO. But have the Board and the executive team thoroughly answered the following questions?

What does it take to be a CEO of our bank? What knowledge, values, experience, and skills are needed?

How does the person in mind measure up against this list of attributes? What areas need to be strengthened to lead the bank effectively?

What experience and training, over the next few years, will ensure that this candidate will meet all the demands of the role when the time comes?

How can the rest of the leadership team be developed to address any gaps in the new CEO's abilities and knowledge?

Taking a broader view, looking beyond one name and one position at a time, helps ensure that as a team, the bank leadership brings together all the intellectual resources, experience, skill, values, and judgment that you are looking for. Complementary assets and roles can contribute significantly to your future success.

Indeed, the best banks think beyond replacement. They expect the next person in any key role to be even better than the current occupant. The next generation may bring new insights into technology, or publicity and the media. Taking steps to develop future talent before it is needed includes cultivating these areas of expertise, nurturing unique strengths, to bring new knowledge and ideas into the executive ranks.

As I mentioned in my earlier article, at many banks replacing the leadership is going to be a major issue because they are run by a cohort of individuals of similar age, many of whom will retire within a short span of time. The best bet for replacing several key roles a few years down the road is to start growing people for those roles now ... whether or not you already know who will fill those positions.

And an even better bet is to think of "succession planning" as something that applies to the entire organization. In my next article in this series, I'll raise the issue of which "employee replacements" have the greatest impact on your customers, and their loyalty to your bank.